Secured Transactions

Question 1

Tangible Collateral Items -

Fix Farm ICE Cream

Answer 1

Fixtures

Farm products

Inventory
Consumer goods
Equipment

Question 2

Intangible collateral items: -

I CARD

Answer 2

Investment property - stocks and bonds

Chattel paper - a piece of writing that shows evidence of two things: a monetary obligation and a security interest in, or lease of, specific goods.
Accounts Receivable
Deposit accounts

Question 3

Perfection - provides notice to third parties, that a security interest exists .

3 way to achieve:

FAT

Answer 3

F - Financing Stmt (file)^^
A - Automatic Perfection (PMSI)
T - Take Possession (I kept your beautiful painting until u pay off debt)

^^- lasts for five years and can be renewed as long as done six months before expiration

Question 4

How does attachment occur?

RIVer

((Girl felt attached to her baby that died)

Answer 4

Rights - the debtor must have rights to the collateral;
Interest - the debtor must agree to give the secured party, a security interest (binding security agreement)
Value - the secured party must give value; in other words, gives the debtor loaned money or an item or service.

Question 5

Attachment: what are the elements of a binding security agreement?

AID

Answer 5

A - Authentication by the debtor
I - Intent to create a security interest
D - Description of the collateral

Question 6

Attachment - how achieved:

PIG !!!!!!!!!

Answer 6

P - Property must be owned by debtor (must have rights to it)

I - Interest is created

 a. Take possession of the goods — i.e- layaway OR

   b. Signed security agreement. A writing that includes a description of the asset and signed by the debtor. The agreement must reasonably identify the collateral. A generic description is no good.

 c. Note that after acquired collateral clauses are enforceable. This type of clause is a floating lien and is enforceable except for consumer goods.

G - Give value to the debtor. Promise not good enough.

Question 7

Purchase Money Security Interest (PMSI)

Answer 7

A. a three party transaction enabling loan; a loan from the secured party to the debtor that enables the debtor to buy collateral from a third party (seller/manufacturer). Secured party retains a security interest in the collateral purchased with the loan money.
B. Secured party sells debtor collateral on credit. Secured party retains a security interest in the collateral purchased on credit. (example, manufacturer sells buyer collateral on credit).

Question 7

Special Rule: Secured Party v. Buyer of Collateral

Answer 7

Consumer to Consumer Sales
In the case of consumer goods, a buyer takes free of a security interest even though it is perfect IF he buys without knowledge of the interest, for value, and for his own personal, family, or household purposes UNLESS prior to the purchase the secured party has filed a financing statement covering the goods.
NOTE: the goods must be consumer goods in BOTH the hands of the buyer and the debtor

Question 8

Who does creditor want to protect themselves against

DOTS

Answer 8

Debtor - by attaching
Other creditor - by attaching & perfecting
Trustee in bankruptcy - “ “
Subsequent purchaser (private) - “ “

Question 9

PMSI

Answer 9

• Creditor gave me the money to buy the asset that became the collateral;
• Always first in priority for that collateral

Question 10

Automatic perfection

Answer 10

PMSI in consumer goods - automatically perfects without having to file.

Loophole - if the sale is from consumer to, that second consumer takes it free of the automatic perfection
You can close the loop hole by filing a financing statement within 20 days of attachment

Question 11

Inventory rule

Answer 11

If Costco sells me some thing, I am buying their inventory. I get it free of any perfected interest against Costco.